Sun Rediscovers Its Inner Mediocrity

Sun Microsystems'(JAVA) stock was taking it on the chin Friday, as the company reverted to its habitual underperformance and investors reacted with familiar ferocity.

The struggling computer maker reported its lowest gross margin in nearly two years, projected a return of the red ink in the current quarter, and conceded that it does not expect any growth in the U.S. -- the region that accounts for 38% of its sales -- for at least the next two quarters.

And yet, true to form, Sun's management is adamant that the company is better positioned to prosper than ever, once a few economic gray clouds pass.

"If anything we feel very good about the breadth of the product line we're sitting on," CEO Jonathan Scwhartz told analysts in a conference call Friday. "The feedback we're getting from customers is fantastic."

The feedback from Wall Street was decidedly less cheery however. Shares of Sun fell 12.3%, or $1.31, at $9.32 in midday trading Friday.

The Santa Clara, Calif., company's shares are down 63% from their 52-week high of $25.04 and are trading at the lowest level in years.

Pacific Crest Securities analyst Brent Bracelin says Sun has become "a bit of a broken record."

"This is a company [in which] every year we sit here in July and hear the same story: the goal is to grow revenue and expand margins," says Bracelin, who has a neutral rating on Sun shares.